Update June 29, 2020: The Court ruled that the Small Business Administration’s previous restrictions on business owners with criminal records were unlawful, prior to their June 24 rule change spurred by our lawsuit and months of advocacy. The application deadline was extended for our clients, who were made eligible by the June 24 changes. Read more about the ruling here.
June 24, 2020 — Today, the Small Business Administration (SBA) issued a new rule expanding eligibility for federal Paycheck Protection Program (PPP) loans to include a broader number of small business owners with criminal records, a group that is disproportionately Black and Latinx, to help keep their businesses and employees financially afloat in the wake of COVID-19’s massive economic impact.
The new rule comes in response to a lawsuit the American Civil Liberties Union (ACLU), the Public Interest Law Center, Washington Lawyers’ Committee for Civil Rights and Urban Affairs, and partners Jenner & Block and Weil, Gotshal & Manges filed in federal court last week to stop the SBA from denying federal PPP loans to tax-paying business owners with certain criminal histories — such as those with pending charges, those serving parole, probation, or those who have been convicted of a felony within the last five years.
Under the new rule, small business owners with pending misdemeanor charges and those on probation or parole for older crimes may now apply. Business owners with pending felony charges or those currently on probation or parole for a felony offense committed in the last year, and five years for those with financial crimes, are still barred from eligibility.
Individuals involved in the case commented:
Claudia De Palma, Staff Attorney at the Public Interest Law Center: “We are glad that the SBA has, in response to our lawsuit and months of pressure from advocates, changed its needlessly restrictive rules barring many people with criminal histories from small business aid. But this issue is not fixed, and our case will move forward. Without an extension, these newly eligible business owners, who never should have been ineligible in the first place, only have six days to apply for relief, after months of economic hardship that fell hardest on Black and Lantinx communities. We will continue to fight for a future where Americans with criminal histories can live their lives and contribute to their communities without facing years of barriers, bias, and discrimination.”
Joanna Wasik, Counsel at Washington Lawyers’ Committee for Civil Rights and Urban Affairs: “We are gratified that the SBA has concluded – correctly — that more business owners who have been involved in the criminal legal system, including our clients Mr. Merritt and Mr. Garland, should be eligible to apply for PPP loans. This is a win for our clients and others in similar situations. However, the SBA’s last-minute changes, issued just six days prior to the June 30 deadline, are a day late and a dollar short. Our lawsuit continues because newly eligible business owners must have more time to hear about the new rule and apply for the much-needed loans, and a smaller group of business owners remain excluded by the SBA.”
ReNika Moore, Director of the ACLU’s Racial Justice Program: “The SBA’s new rule is a step in the right direction, but there is still more work to be done. We see it as a win that small business owners who have been excluded from accessing this relief up until today — including two of our clients who were denied or unable to apply for PPP loans due to their criminal histories — can now apply and get the access to the financial relief they need. But while the new rule broadens eligibility for many small business owners with criminal records, it’s simply not enough. Some small businesses with criminal records are still excluded, and given the deadline to apply for PPP loans closes in six days, on June 30, we contend that the application deadline should be extended to ensure all impacted individuals have a fair chance to apply for and access PPP loans.
“All small business owners and their workers — regardless of any criminal record — should have access to this economic lifeline, and we won’t stop fighting until it’s afforded to all.”